India Glycols demerger targets value unlock as premium spirits and chemicals expand

Investment View and Demerger Catalyst

Arihant Capital Research maintains a BUY recommendation on India Glycols Ltd with a target price of Rs 1,639, compared with the CMP of Rs 1,071. The broker views the NCLT-approved demerger into three focused businesses as the central value-unlocking catalyst.

The NCLT sanctioned the scheme on July 17, 2026, although the effective date is still pending. The proposed entities are:

• India Glycols Ltd: Bio-based specialty chemicals, specialty glycols, performance chemicals and gases.
• IGL Spirits Ltd: Potable spirits and biofuels.
• Ennature Bio Pharma Ltd: Nutraceuticals, APIs and biopolymers.

Arihant believes that the three pure-play structures could remove the conglomerate discount, improve management focus and allow each business to pursue its own growth trajectory.

Q1FY27 Financial Performance

India Glycols reported Q1FY27 revenue of Rs 1,130 crore, up 8.6 per cent year on year and 15.8 per cent quarter on quarter, although it was below Arihant's estimate of Rs 1,180 crore. Gross profit increased 19.3 per cent year on year to Rs 433 crore and exceeded the broker's estimate of Rs 413 crore.

Gross margin expanded by 342 basis points year on year and 47 basis points quarter on quarter to 38.3 per cent, supported by product mix and pricing. EBITDA margin improved year on year but declined sequentially to 15.0 per cent as higher employee and other costs partly offset the gross-margin gains. PAT rose 32.2 per cent year on year to Rs 97 crore, broadly in line with the broker's Rs 99 crore forecast. Finance cost declined 43.6 per cent year on year to Rs 25 crore following debt reduction.

IGL Spirits: Premiumisation and Expansion

Management reported IMFL revenue growth of 26 per cent year on year, with volumes reaching 1.4 million cases. Prestige and Above volumes nearly doubled. The company is pursuing premiumisation through deluxe whisky, semi-premium vodka and white spirits launches, and expects revenue growth to exceed volume growth.

Additional initiatives include distribution of five Amrut brands in North India, plans to double volumes and expand eastward, a 15-year exclusive Bacardi maturation partnership, and defence-canteen approvals for three to four brands. IGL Spirits retains a dominant country-liquor market share in Uttar Pradesh and Uttarakhand. Captive high-quality ENA production and biofuel integration support input quality, cost leadership and margins.

Management aspires to achieve more than Rs 500 crore of EBITDA in FY27E and more than Rs 1,000 crore over four to five years.

Chemicals and Ennature Bio Pharma Outlook

Chemicals

Green-solvent volumes rose 6 per cent year on year and value increased 13 per cent, with gross margins close to 50 per cent. Glycols value grew 83 per cent year on year, while performance chemicals grew 40 per cent but missed targets because of Middle East export disruption and raw-material shortages.

Management noted that higher crude prices made bio-EO cost competitive. However, raw-material shortages, collapsed Middle East exports and freight rates rising 5 to 20 times remained headwinds. Management aspires to achieve Rs 2,500 crore of chemical revenue and more than Rs 400 crore of chemical EBITDA over four to five years.

Ennature Bio Pharma

Ennature Bio Pharma reported thioicolchicoside sales growth of 26 per cent quarter on quarter and nicotine sales growth of 2x quarter on quarter. Growth was aided by European customer conversions and new crude-processing capacity at Kashipur. Management targets revenue of Rs 600 crore to Rs 700 crore and EBITDA of Rs 130 crore to Rs 150 crore over four to five years.

Earnings Outlook and Capital Allocation

Arihant estimates India Glycols' FY26-FY29E revenue, EBITDA and PAT CAGR at 12.0 per cent, 15.4 per cent and 29.0 per cent, respectively. EBITDA margin is expected to reach 16.9 per cent in FY29E.

The broker expects minimal FY27E capex of Rs 5 crore to Rs 20 crore through modular expansions using existing assets. Management targets becoming debt-free from FY28E.

Sum-of-the-Parts Valuation

Arihant's target price of Rs 1,639 is based on an FY29E sum-of-the-parts valuation across the three proposed businesses.

The valuation implies an enterprise value of Rs 11,806 crore. After deducting FY29E net debt of Rs 822 crore, the implied equity value is Rs 10,984 crore.

Key Variables and Risks

• Implementation and timing of the NCLT-approved demerger.
• Execution of the premium spirits strategy and expansion initiatives.
• Chemical export conditions, particularly disruption in Middle East markets.
• Availability and pricing of raw materials.
• Freight-cost movements, which have already risen 5 to 20 times in affected routes.
• Segment-level margin performance and achievement of management's medium-term targets.
• Valuation multiples applied to the three businesses.